10-04-2016, 10:15 PM
*** 5-Oct-16 World View -- Mongolia in economic crisis asks the IMF for a bailout
This morning's key headlines from GenerationalDynamics.com
****
**** Mongolia in economic crisis asks the IMF for a bailout
****
![[Image: g161004b.jpg]](http://www.GenerationalDynamics.com/ww2010/g161004b.jpg)
Mongolia's Oyu Tolgoi open-pit copper mine in South Gobi desert
Mongolia is another story of wild spending when the times are good,
resulting in huge debts when times are bad.
In 2011, Mongolia borrowed billions of dollars to invest in huge road
and infrastructure projects. Now the country owes some $2 billion in
public and private debt repayments in 2017 and early 2018, and is
seeking a bailout from the International Monetary Fund. The country's
tugrik currency has been falling sharply - more than 10% this year,
causing the central bank to raise interest rates by 4.5% to 15%.
(America's current Federal funds rate is between 0.25% and 0.5%. The
eurozone, Denmark, Sweden, Switzerland and Japan, have negative
interest rates in some cases.)
The reason that Mongolia's economy appeared invincible in 2011 is
because the country has huge reserves of copper, coal and gold. So
far this year, the country has grown by 1.4%, down from 3% last year.
But in 2011, the economy grew by an astronomical 17.5%, mainly thanks
to foreign investments.
Mongolia's economy has suffered for two reasons. First, China has
been Mongolia's major market for its copper, coal and gold, but
China's economy has been slowing down, and so China has been importing
less of these products than previously.
The second reason is the fall in commodity prices. The sharp plunge
in the last two years of the price of oil has harmed in economies in
countries including Russia, Saudi Arabia and Venezuela. Other
commodities have fallen as well. In 2011, the price of copper was
about $4.50 per pound; today it's around $2 per pound.
In August, the finance minister said the economy is in crisis and the
government pitched a series of austerity measures and taxes that were
later overturned by parliament. The government is now drafting an
“Economic Stabilization Plan” which it hopes will restore its economy
to stability. However, Generational Dynamics has been predicting for
years that the existing global deflationary spiral would continue, and
Mongolia will continue to be a part of that. Bloomberg and IntelliNews and CNN (23-Aug)
****
**** Mongolia signs new mining deal with Rio Tinto for future growth
****
Mongolia hopes to recover from its economic growth by taking advantage
of its rich natural resources. In May of this year, Mongolia signed a
contract with Australian mining giant Rio Tinto to invest $5.3 billion
in the development of the Oyu Tolgoi underground copper and gold mine.
There's an existing Oyu Tolgoi open pit mine, which has been producing
copper since 2013. The underground mine is expected to produce a
considerably higher grade of copper.
The mine will work 365 days a year, with two 12-hour shifts. At the
peak of construction, the underground workforce is expected to be more
than 3,000 people, 95% of them Mongolian workers. First production
from the underground mine is expected in 2020, with the mine producing
at full capacity by around 2030.
However, 2030 is a long way off, and Mongolia has to make debt
repayments now. Mining.com and Reuters and Rio Tinto
Related Articles
KEYS: Generational Dynamics, Mongolia, Oyu Tolgo, copper, gold, coal
Permanent web link to this article
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John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Mongolia in economic crisis asks the IMF for a bailout
- Mongolia signs new mining deal with Rio Tinto for future growth
****
**** Mongolia in economic crisis asks the IMF for a bailout
****
Mongolia's Oyu Tolgoi open-pit copper mine in South Gobi desert
Mongolia is another story of wild spending when the times are good,
resulting in huge debts when times are bad.
In 2011, Mongolia borrowed billions of dollars to invest in huge road
and infrastructure projects. Now the country owes some $2 billion in
public and private debt repayments in 2017 and early 2018, and is
seeking a bailout from the International Monetary Fund. The country's
tugrik currency has been falling sharply - more than 10% this year,
causing the central bank to raise interest rates by 4.5% to 15%.
(America's current Federal funds rate is between 0.25% and 0.5%. The
eurozone, Denmark, Sweden, Switzerland and Japan, have negative
interest rates in some cases.)
The reason that Mongolia's economy appeared invincible in 2011 is
because the country has huge reserves of copper, coal and gold. So
far this year, the country has grown by 1.4%, down from 3% last year.
But in 2011, the economy grew by an astronomical 17.5%, mainly thanks
to foreign investments.
Mongolia's economy has suffered for two reasons. First, China has
been Mongolia's major market for its copper, coal and gold, but
China's economy has been slowing down, and so China has been importing
less of these products than previously.
The second reason is the fall in commodity prices. The sharp plunge
in the last two years of the price of oil has harmed in economies in
countries including Russia, Saudi Arabia and Venezuela. Other
commodities have fallen as well. In 2011, the price of copper was
about $4.50 per pound; today it's around $2 per pound.
In August, the finance minister said the economy is in crisis and the
government pitched a series of austerity measures and taxes that were
later overturned by parliament. The government is now drafting an
“Economic Stabilization Plan” which it hopes will restore its economy
to stability. However, Generational Dynamics has been predicting for
years that the existing global deflationary spiral would continue, and
Mongolia will continue to be a part of that. Bloomberg and IntelliNews and CNN (23-Aug)
****
**** Mongolia signs new mining deal with Rio Tinto for future growth
****
Mongolia hopes to recover from its economic growth by taking advantage
of its rich natural resources. In May of this year, Mongolia signed a
contract with Australian mining giant Rio Tinto to invest $5.3 billion
in the development of the Oyu Tolgoi underground copper and gold mine.
There's an existing Oyu Tolgoi open pit mine, which has been producing
copper since 2013. The underground mine is expected to produce a
considerably higher grade of copper.
The mine will work 365 days a year, with two 12-hour shifts. At the
peak of construction, the underground workforce is expected to be more
than 3,000 people, 95% of them Mongolian workers. First production
from the underground mine is expected in 2020, with the mine producing
at full capacity by around 2030.
However, 2030 is a long way off, and Mongolia has to make debt
repayments now. Mining.com and Reuters and Rio Tinto
Related Articles
- China's yuan devaluation causes currency chaos in Asia (20-Aug-2015)
- Mongolia's natural resource riches lost to corruption and foreigners (08-Aug-2013)
KEYS: Generational Dynamics, Mongolia, Oyu Tolgo, copper, gold, coal
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
